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Boyd Gaming, MGM Resorts join online gaming titan

1 Nov 2011

By Caitlin McGarry and Howard Stutz

LAS VEGAS, Nevada -- Boyd Gaming Corp. and MGM Resorts International announced Monday the casino companies will join forces with a European online gaming giant to create Internet poker websites for American gamblers, if the activity becomes legalized and regulated in the U.S.

Under the agreements, Bwin.party -- operators of Party Poker and the World Poker Tour -- Boyd Gaming and MGM Resorts would jointly own an online gaming company that offers poker to U.S. customers under Bwin.party's brands. Bwin.party would own 65 percent of the company, MGM Resorts would own 25 percent, and Boyd would own 10 percent.

Separately, Boyd and MGM Resorts have long-term agreements that allow the casino operators to manage their own online gaming poker websites under their company's various brands through a licensing agreement that utilizes bwin.party's technology and gaming platforms.

The agreements hinge on Congress passing a bill that would legalize and set up the federal regulation and taxation of Internet poker. Two bills covering online poker have been introduced in Congress.

Many Beltway insiders speculate a proposal to legalize, regulate and tax online poker could be taken up by the House-Senate "supercommittee" that is tasked with finding ideas to slice the federal deficit by $1.2 trillion.

"At present, we would handicap the potential for federal legalization of online poker within the next year as 50-50," Deutsche Bank gaming analyst Carlo Santarelli told investors after the agreements were announced. "The announcements position Boyd and MGM Resorts nicely should federal legalization eventually pass."

For Bwin.party, the agreements would give the company immediate access to American online gambling consumers if legalization happens . Analysts on Monday estimated the U.S. market would be between $3 billion and $5 billion annually.

Union Gaming Group principal Bill Lerner thought poker websites operated by three companies could grab more than 20 percent of the potential U.S. market.

"These arrangements have been put in place to prepare ourselves for the next step," Bwin.party co-Chief Executive Officer Jim Ryan said Monday. "Ultimately, we see a number of MGM and Boyd and Bwin.party websites all acquiring players. We're laying a foundation for a very important milestone."

Brian Balsbaugh, a Las Vegas-based poker player agent, said on Twitter, that Ryan became "the most powerful person in poker" through the agreements with MGM and Boyd.

Boyd Gaming CEO Keith Smith agreed the three companies operating one joint website and multiple individual sites could capture a share of the market.

"(The sites) will probably all complement each other," Smith said. "Internet gaming, and online poker specifically, is all about liquidity, (and) having enough players online at one time to have a game available that individuals want to play."

The deals are contingent on regulatory approval. Ryan said Bwin.party plans to submit an application of suitability to Nevada gaming regulators.

The Boyd-MGM Resorts-Bwin.party agreements are the latest announcements by traditional casino operators to prepare for the legalization of online poker.

Caesars Entertainment Corp. operates Internet poker sites in Europe with British-based 888 Holdings. Last week, Fertitta Interactive, which is part-owned by the founders of Station Casinos, acquired an online gaming software developer.

Both Smith and MGM Resorts Chairman Jim Murren said Bwin.party was a logical partner because the company has been successfully operating legal and regulated Internet gaming in Europe.

"As we narrowed down who we wanted to do business with, (compliance) was an important part," Smith said. "For our company, integrity is very important."

Murren said most of the major gaming companies are exploring similar partnerships.

"Bwin.party is a company that has done it right and done it successfully," Murren said. "They have operated successfully in strictly regulated environments."

Bwin.party is licensed in Gibraltar, France and Italy, and has operated in several other countries while remaining out of the U.S. Bwin, which acquired the World Poker Tour in 2009, merged with PartyGaming earlier this year.

Before the passage of the Unlawful Internet Gambling Enforcement Act of 2006, PartyGaming's PartyPoker brand dominated the online poker industry. The company pulled out of the U.S. market and signed a nonprosecution agreement with the federal government after the act was implemented.

Murren said the move toward online poker is a logical step for the traditional "bricks and mortar" casino industry. Murren also thinks operating a traditional casino should be a prerequisite for gaining an online casino license in the U.S.

"That would show you have a tremendous amount of investment at stake," Murren said. "That would give regulators some comfort."

Smith and Murren would not speculate on the potential for online gaming being legalized. The companies are closely following the events on Capitol Hill.

"We are looking for the right legislation to pass, legislation that has a strong regulatory framework, that has the right legislative aspects that provide the best protections for the players," Smith said.

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